70. BASCO VS.

PAGCOR
FACTS: Petitioners seek to annul the Philippine Amusement and Gaming Corporation (PAGCOR)
Charter - PD 1869, because it is allegedly contrary to morals, public policy and order. Petitioners also
claim that said PD has a "gambling objective" and that Section 13 par 2 of the same PD which exempts
PAGCOR from paying any tax, any kind of term income or otherwise as well as fees, charges as levies of
whatever nature whether national or local is violative of the principles of local autonomy for it is a waiver
of the right of the City of Manila to impose taxes and legal fees.
ISSUE: Whether or not the local autonomy clause is violated by PD 1869
HELD: The petitioner’s contentions are without merit for the following reasons: 1. The City of Manila,
being a mere Municipal corporation hits no inherent right to impose taxes 2. The Charter of the City of
Manila is subject to control by Congress. It should be stressed that "municipal corporations are mere
creatures of Congress" which has the power to "create and abolish municipal corporations" due to its
"general legislative powers". Congress, therefore, has the power of control over Local governments. And
if Congress can grant the City of Manila the power to tax certain matters, it can also provide for
exemptions or even take back the power. 3. The City of Manila's power to impose license fees on
gambling, has long been revoked. Only the National Government has the power to issue "licenses or
permits" for the operation of gambling. Necessarily, the power to demand or collect license fees which is
a consequence of the issuance of "licensesor permits" is no longer vested in the City of Manila. 4. Local
governments have no power to tax instrumentalities of the National Government. PAGCOR is a
government owned or controlled corporation with an original charter. 5. The power of local government
to "impose taxes and fees" is always subject to "limitations" which Congress may provide by law. Since
PD 1869 remains an "operative'' law, its "exemption clause" remains as an exception to the exercise of the
power of local governments to impose taxes and fees. It cannot therefore be violative but rather is
consistent with the principle of local autonomy. Besides, the principle of local autonomy under the 1987
Constitution simply means "decentralization". It does not make local governments sovereign within the
slate or an - imperiurn in imperio.
NOTES:
1. ID.; NOT A VIOLATION OF EQUAL PROTECTION CLAUSE. — Petitioners next contend that
P.D. 1869 violates the equal protection clause of the Constitution, because "it legalized PAGCOR —
conducted gambling, while most gambling are outlawed together with prostitution, drug tra>cking and
other vices" We, likewise, Knd no valid ground to sustain this contention. The petitioners' posture ignores
the wellaccepted meaning of the clause "equal protection of the laws." The clause does not preclude
classiKcation of individuals who may be accorded different treatment under the law as long as the
classiKcation is not unreasonable or arbitrary (Itchong v. Hernandez, 101 Phil. 1155). A law does not
have to operate in equal force on all persons or things to be conformable to Article III, Section 1 of the
Constitution (DECS v. San Diego, G.R. No. 89572, December 21, 1989). The "equal protection clause"
does not prohibit the Legislature from establishing classes of individuals or objects upon which different
rules shall operate (Laurel v. Misa, 43 O.G. 2847). The Constitution does not require situations which are
different in fact or opinion to be treated in law as though they were the same (Gomez v. Palomar, 25
SCRA 827). Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of the equal
protection is not clearly explained in the petition. The mere fact that some gambling activities like
cockKghting (P.D. 449), horse racing (R.A. 306 as amended by RA 983), sweepstakes, lotteries and races
(RA 1169 as amended by B.P. 42) are legalized under certain conditions, while others are prohibited,
does not render the applicable laws, P.D. 1869 for one, unconstitutional. "If the law presumably hits the
evil where it is most felt, it is not to be overthrown because there are other instances to which it might
have been applied." (Gomez v. Palomar, 25 SCRA 827) "The equal protection clause of the 14th
Amendment does not mean that all occupations called by the same name must be treated the same way;
the state may do what it can to prevent which is deemed as evil and stop short of those cases in which
harm to the few concerned is not less than the harm to the public that would insure if the rule laid down
were made mathematically exact." (Dominican Hotel v. Arizana, 249 US 2651)
2. ID.; NOT A VIOLATION OF THE LOCAL AUTONOMY CLAUSE IN THE
CONSTITUTION. — The power of local government to "impose taxes and fees" is always subject to
"limitations" which Congress may provide by law. Since PD 1869 remains an "operative" law until
"amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its "exemption clause" remains
as an exception to the exercise of the power of local governments to impose taxes and fees. It cannot
therefore be violative but rather is consistent with the principle of local autonomy. Besides, the principle
of local autonomy under the 1987 Constitution simply means "decentralization" (III Records of the 1987
Constitutional Commission, pp. 436-436, as cited in Bernas, The Constitution of the Republic of the
Philippines, Vol. II, First Ed., 1988, p. 374). It does not make local governments sovereign within the
state or an "imperium in imperio." "Local Government has been described as a political subdivision of a
nation or state which is constituted by law and has substantial control of local affairs. In a unitary system
of government, such as the government under the Philippine Constitution, local governments can only be
an intra sovereign subdivision of one sovereign nation, it cannot be an imperium in imperio. Local
government in such a system can only mean a measure of decentralization of the function of government.
As to what state powers should be "decentralized" and what may be delegated to local government units
CD Technologies Asia, Inc. 2019 cdasiaonline.com remains a matter of policy, which concerns wisdom.
It is therefore a political question. (Citizens Alliance for Consumer Protection v. Energy Regulatory
Board, 162 SCRA 539). What is settled is that the matter of regulating, taxing or otherwise dealing with
gambling is a State concern and hence, it is the sole prerogative of the State to retain it or delegate it to
local governments.